Office Market May be Nearing Peak

At the conclusion of 2015, Pittsburgh’s office market is beginning to show
signs of peaking. Overall office vacancy rates for the 4th quarter increased
slightly over 3rd quarter results from 8.1% vacant to 8.3% vacant at year
end. Rental rates for office space in all submarkets and classes decreased
slightly in the 4th quarter to $20.51/sf, from $20.55/sf in the 3rd quarter, or
a 0.02% decrease.

Pittsburgh’s CBD had a few notable transactions in 2015. PNC moved
into its new Platinum LEED Certified 800,000 SF office tower located at
300 Fifth Avenue in the 4th quarter. PPG Industries, Inc. maintained its
headquarter presence at One PPG Place, renewing approximately 300,000
SF there. In November 2015, US Steel Corporation announced it would not
be moving forward with a planned “300,000 SF Build-to-Suit” at the site of
the former Civic Arena, instead, electing to extend its lease commitment at
600 Grant Street for one more year through the summer of 2018. Millcraft’s
Tower Two-Sixty, a mixed use development including office, retail and a
hotel adjacent to the vibrant Market Square, signed three office leases and is
closing in on 80% occupancy prior to the planned Spring 2016 completion
date.

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